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August 28 2013

Nasdark | Sniper In Mahwah

Nasdark | Sniper In Mahwah
http://sniperinmahwah.wordpress.com/2013/08/23/nasdark

La panne générale du #Nasdaq hier, jeudi 22 août 2013 (la plateforme électronique historique a été incapable de fonctionner pendant trois heures, ce qui est particulièrement long http://seenthis.net/messages/167395 ) est un autre symptôme de cette complexité des marchés, une conséquence directe de Regulation National Market System (ou Reg NMS), décidé par la SEC en 2005 et mis en place en 2007. Rappelons, pour faire court, que depuis 2007 et Reg NMS, il y a aux Etats-Unis 13 marchés officiels (Nyse, Nyse Arca, Nasdaq, Bats, Direct Edge EDGX et EDGA, etc.) et une cinquantaine de « plateformes alternatives », ou alternative trading systems, qui regroupent notamment les dark pools (où les transactions se font de manière complètement anonymes, sans informations sur les cotations) et les internalisateurs (des "marchés" internes qui appartiennent par exemple à une banque, laquelle fait correspondre en interne ordres d’achats et ordres de ventes de ses clients sans disséminer de cotations à l’extérieur de cette plateforme interne).

#hft #finance #algorithmie

Nasdark #2 – De l’espace et du #temps
http://sniperinmahwah.wordpress.com/2013/08/26/nasdark-2-de-lespace-et-du-temps

L’histoire est ironique : même en passant au tout électronique, les marchés ont recréé cette proximité spatiale dont avaient besoins les traders humains du temps des parquets… C’est ainsi que le Nyse promet à ces clients colocataires d’exécuter un ordre en 37 microsondes, soit 0.000037 secondes, soit 4 fois moins de temps qu’il n’en faut pour que le son d’une voix humaine parte du fond de la gorge pour arriver à la bouche.

https://mapsengine.google.com/map/u/0/viewer?mid=zrNZZNGK5JGs.kpbJtsC1ztHI

Reg NMS est très clair sur un point : même si un courtier achète directement les informations concernant les cotations à une plateforme/un marché (direct feed), le prix auquel il doit traiter un titre doit l’être en fonction des prix affichés par le NBBO (ce qui est logique car le NBBO informe de manière égalitaire tous les participants). Or, récupérer les données du NBBO prend plus de temps que de traiter les direct feeds… et ce en raison de la colocation (tout se tient).

August 06 2013

Le patron d'Amazon rachète le « Washington Post »

Le patron d’Amazon rachète le "Washington Post"
http://www.lemonde.fr/actualite-medias/article/2013/08/05/le-patron-d-amazon-rachete-le-washington-post_3457822_3236.html

Le groupe #Washington_Post a annoncé, lundi 5 août, la cession de ses activités d’édition, dont le quotidien portant son nom, au patron-fondateur du groupe de distribution en ligne #Amazon, #Jeff_Bezos, pour 250 millions de dollars. « L’acheteur est une entité qui appartient à M. Bezos en tant qu’individu, et pas Amazon Inc », précise le communiqué du groupe.

Et pas que le quotidien : http://www.slate.com/blogs/moneybox/2013/08/05/bezos_bought_a_bit_more_than_the_post.html

Quel #management va s’imposer dans ce groupe de #presse ? Des hypothèses là : #disruption
http://qz.com/112073/how-things-are-about-to-change-at-the-washington-post-now-that-jeff-bezos-is-in-
http://qzprod.files.wordpress.com/2013/08/e-ink-mobius.jpg

Jeff le #libertarien se veut rassurant :
http://www.washingtonpost.com/national/jeff-bezos-on-post-purchase/2013/08/05/e5b293de-fe0d-11e2-9711-3708310f6f4d_story.html

I won’t be leading The Washington Post day-to-day.

Je m’attendais pas à celle-là ce matin... http://seenthis.net/messages/162928

L’occasion de lire :

En Amazonie. Infiltré dans le « meilleur des mondes »
http://www.monde-diplomatique.fr/2013/08/RIMBERT/49581

En plus je viens de voir Le capital de Costa-Gavras (oui le truc avec Gad Elmaleh) où ça cause de #hft et de grands enfants qui jouent qui jouent jusqu’à ce que ça pète... alors je vous dis pas l’état dans lequel ça me met.

Quant à Gorge Profonde, on attend encore sa réaction.

C’est quand même marrant que le parangon du #journalisme d’#investigation soit racheté par un des maîtres des #bigdata marchandes. En ces temps de persécution des #whistleblowers. Vivement la fusion Publicis / Omnicom !

August 04 2013

A propos du hack d'AP par la Syrian electronic army (?)

A propos du hack d’AP par la Syrian electronic army (?)
http://seenthis.net/messages/134175

Information, délit d’initié et hautes fréquences | Sniper In Mahwah
http://sniperinmahwah.wordpress.com/2013/08/03/information-delit-dinitie-et-hautes-frequences

Ce qui est gênant est que 99,99% de la presse s’est empressée de désigner ces méchants #algorithmes de #trading à haute fréquence comme étant responsable de la débâcle, alors qu’elle fut purement humaine. Comme me le confiait le responsable technique d’une bourse européen récemment, les #marchés ont en fin de compte plutôt intérêt à ce que les médias soient à côté de la plaque lorsqu’ils évoquent ce genre d’événements car cela leur permet de continuer leurs activités sans que l’on observe de trop près les microstructures de marché. Il est paradoxal que l’information, si importante dans les marchés, soit parfois complètement négligée lorsque les médias écrivent sur ces marchés.

http://www.nanex.net/aqck2/4309/20130607.f_ALL830.08.29.57.295_5ms.0.gif La réaction des marchés à l’annonce du taux de chômage aux Etats-Unis (7 juin 2013) #finance #hft

August 17 2012

Wall Street’s robots are not out to get you

ABOVE by Lyfetime, on FlickrTechnology is critical to today’s financial markets. It’s also surprisingly controversial. In most industries, increasing technological involvement is progress, not a problem. And yet, people who believe that computers should drive cars suddenly become Luddites when they talk about computers in trading.

There’s widespread public sentiment that technology in finance just screws the “little guy.” Some of that sentiment is due to concern about a few extremely high-profile errors. A lot of it is rooted in generalized mistrust of the entire financial industry. Part of the problem is that media coverage on the issue is depressingly simplistic. Hyperbolic articles about the “rogue robots of Wall Street” insinuate that high-frequency trading (HFT) is evil without saying much else. Very few of those articles explain that HFT is a catchall term that describes a host of different strategies, some of which are extremely beneficial to the public market.

I spent about six years as a trader, using automated systems to make markets and execute arbitrage strategies. From 2004-2011, as our algorithms and technology became more sophisticated, it was increasingly rare for a trader to have to enter a manual order. Even in 2004, “manual” meant instructing an assistant to type the order into a terminal; it was still routed to the exchange by a computer. Automating orders reduced the frequency of human “fat finger” errors. It meant that we could adjust our bids and offers in a stock immediately if the broader market moved, which enabled us to post tighter markets. It allowed us to manage risk more efficiently. More subtly, algorithms also reduced the impact of human biases — especially useful when liquidating a position that had turned out badly. Technology made trading firms like us more profitable, but it also benefited the people on the other sides of those trades. They got tighter spreads and deeper liquidity.

Many HFT strategies have been around for decades. A common one is exchange arbitrage, which Time magazine recently described in an article entitled “High Frequency Trading: Wall Street’s Doomsday Machine?”:

A high-frequency trader might try to take advantage of minuscule differences in prices between securities offered on different exchanges: ABC stock could be offered for one price in New York and for a slightly higher price in London. With a high-powered computer and an ‘algorithm,’ a trader could buy the cheap stock and sell the expensive one almost simultaneously, making an almost risk-free profit for himself.

It’s a little bit more difficult than that paragraph makes it sound, but the premise is true — computers are great for trades like that. As technology improved, exchange arb went from being largely manual to being run almost entirely via computer, and the market in the same stock across exchanges became substantially more efficient. (And as a result of competition, the strategy is now substantially less profitable for the firms that run it.)

Market making — posting both a bid and an offer in a security and profiting from the bid-ask spread — is presumably what Knight Capital was doing when it experienced “technical difficulties.” The strategy dates from the time when exchanges were organized around physical trading pits. Those were the bad old days, when there was little transparency and automation, and specialists and brokers could make money ripping off clients who didn’t have access to technology. Market makers act as liquidity providers, and they are an important part of a well-functioning market. Automated trading enables them to manage their orders efficiently and quickly, and helps to reduce risk.

So how do those high-profile screw-ups happen? They begin with human error (or, at least, poor judgment). Computerized trading systems can amplify these errors; it would be difficult for a person sending manual orders to simultaneously botch their markets in 148 different companies, as Knight did. But it’s nonsense to make the leap from one brokerage experiencing severe technical difficulties to claiming that automated market-making creates some sort of systemic risk. The way the market handled the Knight fiasco is how markets are supposed to function — stupidly priced orders came in, the market absorbed them, the U.S. Securities and Exchange Commission (SEC) and the exchanges adhered to their rules regarding which trades could be busted (ultimately letting most of the trades stand and resulting in a $440 million loss for Knight).

There are some aspects of HFT that are cause for concern. Certain strategies have exacerbated unfortunate feedback loops. The Flash Crash illustrated that an increase in volume doesn’t necessarily mean an increase in real liquidity. Nanex recently put together a graph (or a “horrifying GIF“) showing the sharply increasing number of quotes transmitted via automated systems across various exchanges. What it shows isn’t actual trades, but it does call attention to a problem called “quote spam.” Algorithms that employ this strategy generate a large number of buy and sell orders that are placed in the market and then are canceled almost instantly. They aren’t real liquidity; the machine placing them has no intention of getting a fill — it’s flooding the market with orders that competitor systems have to process. This activity leads to an increase in short-term volatility and higher trading costs.

The New York Times just ran an interesting article on HFT that included data on the average cost of trading one share of stock. From 2000 to 2010, it dropped from $.076 to $.035. Then it appears to have leveled off, and even increased slightly, to $.038 in 2012. If (as that data suggests) we’ve arrived at the point where the “market efficiency” benefit of HFT is outweighed by the risk of increased volatility or occasional instability, then regulators need to step in. The challenge is determining how to disincentivize destabilizing behavior without negatively impacting genuine liquidity providers. One possibility is to impose a financial transaction tax, possibly based on how long the order remains in the market or on the number of orders sent per second.

Rethinking regulation and market safeguards in light of new technology is absolutely appropriate. But the state of discourse in the mainstream press — mostly comprised of scare articles about “Wall Street’s terrifying robot invasion” — is unfortunate. Maligning computerized strategies because they are computerized is the wrong way to think about the future of our financial markets.

Photo: ABOVE by Lyfetime, on Flickr

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